(By Salman - iStockAnalyst Writer)US stocks extended its slide on Tuesday as investors remained worried about credit markets and health of financial sector. Recession fears also weighed upon the markets.

The Dow Jones Industrial Average tumbled 508.39 points, (-5.11%), to finish at 9,447.11. The S&P 500 shrank 60.66 points (-5.74%), to 996.23. The Nasdaq Composite lost 108.08 points, (-5.80%), to end at 1,754.88.Financials suffered the most in Tuesday's sell off.

Earlier, US stocks advanced in the opening trade and the Dow even breached the 10,000 mark briefly, after a larger than expected rate cut by Australian Central Bank triggered speculation that the US Fed may too follow in order to contain the current credit crisis. However markets could not hold on to its gains and succumbed to the selling pressure.

Meanwhile, in a speech on Tuesday, US Fed chairman indicated a possible rate cut by US policymakers. Bernanke said "In light of developments, the Fed will need to consider whether the current stance of policy remains appropriate". Recent economic data and the financial market turmoil "suggests that the outlook for economic growth has worsened and that the downside risks to growth have increased." he said further. The FOMC is scheduled to meet on Oct. 28-29.

Earlier, the Fed announced it would buy unsecured commercial pap in order to unfreeze the $1.6 trillion U.S. commercial paper market.

However money markets still remained strained and overnight and short-term lending rates ruled well above official central bank interest rate. The British Bankers' Association said on Tuesday that the London interbank offered rate, or LIBOR, that banks charge each other for such loans rose 157 basis points to 3.94% on Tuesday. The Libor-OIS spread, the difference between the three- month dollar rate and the overnight indexed swap rate, climbed 2 basis points to a record 290 basis points. Passage of $700 billion bailout package and numerous interventions by a number of central banks has not much helped in unblocking the money markets as banks remained reluctant to lend money.

Bank of America (BAC) tumbled 26.2%.The bank announced yesterday that it plans to pay a dividend of 32 cents a share in December, half of what it paid previously. It will also sell up to $10 billion in common stock in order to achieve Tier 1 capital ratio. The bank said that it earned $1.18 billion, or 15 cents a share, a 68% fall. Analysts estimated the company to report earnings of 61 cents a share.

Morgan Stanley plummeted 24.9% on concerns its deal to raise $9 billion from Japan's Mitsubishi UFJ Financial Group Inc. might be scuttled.

JP Morgan lost $4.68 or 10.64% to $39.32. Merrill Lynch & Co. (MER) dropped 26%. Citigroup (C) declined 12.98%.

GE (GE) slipped 5.05%.

Technology stocks were battered on Tuesday as well. Apple Inc. (AAPL) skidded 9.1%, Microsoft Corp. (MSFT) retreated 7.1% and Dell (DELL) dropped 9%. Google (GOOG), Oracle Corp (ORCL), eBay (EBAY) all dropped by at least 5%.

However, Advanced Micro Devices Inc. (AMD), which rose 8.5%, remained the bright spot among the technology stocks. On Tuesday, the company announced that it is planning to spin off its manufacturing operations to a new joint venture, Foundry Co., with an Abu Dhabi investment firm. AMD will own 44.4% and Advanced Technology Investment Co. of Abu Dhabi will own 55.6% of the venture. AMD said it would contribute to the venture its manufacturing facilities, and ATIC will pay $2.1 billion for its stake.

The largest U.S. aluminum producer, Alcoa Inc. (AA) gave up 3.7%, to $16.09 after it said third-quarter profit excluding some items was 37 cents a share or $268 million, down from 63 cents a share or $555 million, a year ago.

Among Energy stocks, Chevron (CVX) decreased 4.54% while Exxon Mobil (XOM) subtracted 1.64%.

Auto major General Motors Corp. (GM) retreated 10.85%. Ford Motor Co. (F) was down 20.87%.

Retailer Home Depot (HD) sank 4.08%.

Meanwhile, late on Tuesday, insurer MetLife (MET) announced that for the third quarter of 2008, the company expects earnings to be between $1,005 million and $1,150 million, or $1.38 to $1.58 per share. Analysts estimated the company to earn $1.44 per share for the third quarter. The company also announced a public offering of 75 million shares. The shares of the insurer were down 16.81% on Tuesday.

European stocks settled mixed on Tuesday. U.K. FTSE advanced 16.03 (+0.35%) to 4,605.22. The German DAX subtracted 1.12% while French CAC gained 0.55%.

Among Asian stocks, the Nikkei Stock Average of 225 finished at 10,155.90, down 317.90 points or 3.03%.

On Tuesday, NYMEX Crude oil for November delivery gained $2.25 (+2.6%), to settle at $90.06 a barrel.

Disclosure: Author does not own any of the stocks discussed here.